Three months since predicting the world economy would grow 3.9% this year and next, Lagarde signalled in Washington that she is no longer quite so optimistic. The fund will update its World Economic Outlook on October 9 ahead of opening its annual meeting in Bali, Indonesia.
"Six months ago, I pointed to clouds of risk on the horizon," Lagarde said. "Today, some of those risks have begun to materialise."
The IMF Managing Director said protectionist rhetoric was turning into "actual trade barriers," spreading uncertainty among businesses and consumers. A strengthening US dollar and tightening financial conditions have increased challenges for many emerging markets, she said.
Lagarde called on countries to resolve their trade disputes, warning that the fracture of corporate supply chains could have “devastating” effects. "History shows that, while it is tempting to sail alone, countries must resist the siren call of self-sufficiency - because as the Greek legends tell us, that leads to shipwreck," she said, without naming countries that are putting up new barriers, Bloomberg reported.
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